Cleveland-Cliffs Looks Cheap. The Balance Sheet Explains Why.

Here is the tension inside the case that Cleveland-Cliffs (NYSE: CLF) is a bargain after its long slide. On the two multiples that make casual investors blink, the stock is cheap: it trades around a third of annual sales and a bit over book value. At the same time, the market is paying roughly 50 times trailing EBITDA for the company's near-zero earnings power. Both figures are real, and the gap between them is the story.

That first kind of cheapness is not evidence of a mispricing. It is the residue of a brutal 2025, when Cliffs lost roughly $1.4 billion on $18.6 billion of revenue — nearly double the prior year's loss — as weak auto demand, lower spot steel prices, and a global glut crushed margins. When earnings collapse, price-to-sales and price-to-book fall with them even if nothing else changes. The 50x EBITDA multiple is the honest read: how cheap the stock really is depends entirely on whether those earnings come back.

The more important number is the one the "cheap stock" framing hides, and it is the debt. Cliffs borrowed heavily to buy Canadian steelmaker Stelco in late 2024, and Fitch cut the company's credit rating to B+ in March 2026, deep into junk, flagging the leverage behind the acquisition. The market data put net debt near $7.6 billion with a debt-to-equity ratio around 1.3, and the company burned cash over the trailing year. This is where cheapness stops meaning anything: no margin of safety exists until the balance sheet is shown to survive the cycle, and a high-multiple, cash-burning balance sheet is exactly how a bargain turns into a trap.

What keeps this from being a pure avoid is the quarterly data since. In the second quarter of 2026, Cliffs reported $5.2 billion in revenue and adjusted EBITDA of $286 million, roughly triple the $95 million of the quarter before. It generated $230 million of operating cash flow and returned to positive free cash flow. The average realized price per ton climbed to $1,124 from $998 in the prior quarter, helped by tariffs that are keeping foreign steel out, while profitable peers like Nucor still trade around 11 times EBITDA. Management guided third-quarter adjusted EBITDA to roughly $575 million, about double the second quarter, and laid out a target of getting leverage below 2.5x debt-to-EBITDA by mid-2027. Cliffs has even started paying a modest six-cent quarterly dividend, a near-2% forward yield that reads as a confidence gesture rather than an income stream for a company still deleveraging.

So the fair question is not whether the multiple looks cheap; it is whether the turnaround is durable enough for the balance sheet to carry it. On the latest evidence the direction is right: EBITDA is recovering, the company is generating cash again, and it has an explicit plan to pay the debt down. I would not call this a margin-of-safety value position, because a good quarter plus guidance is not durability, and the Stelco leverage still sits on top of a commodity business. It is closer to a levered call on steel prices — genuinely attractive if prices hold and the second half delivers, and exposed if steel rolls over or the guidance disappoints. The next two quarters and the pace of debt payoff are where this "below fair value" claim gets proven or quietly dropped.